The S&P 500 has confirmed a correction as stocks fall due to war fears

The S&P 500’s 1% drop on Tuesday confirmed that the world’s most watched stock index was in a correction for the first time since the 2020 Wall Street crash caused by the COVID-19 pandemic.US investors sold stocks amid rising fears of war between Russia and Ukraine, though they pared some losses after US President Joe Biden announced a new round of sanctions against Russia. These geopolitical concerns have added to recent concerns about the path of interest rate hikes by the United States Federal Reserve as the central bank attempts to rein in inflation at 40-year highs.

Earlier, NATO Secretary-General Jens Stoltenberg stated that the alliance believed Russia was still planning a major offensive against Ukraine in response to Moscow’s recognition of two separatist regions in the former Soviet republic’s east. The S&P 500 is now down 10.25 percent from its record closing high of 4,796.56 on Jan. 3, confirming a correction based on a widely accepted definition of a 10% or greater decline. Several times in recent trading sessions, the index briefly fell more than 10% from its intraday high, but never closed at that level.

The small-cap Russell 2000 index confirmed last month that it was in a bear market, with a 20% drop from its most recent high. However, some analysts believe that smaller stocks are nearing the bottom.

In January, the Nasdaq announced that it had entered its fourth correction since the outbreak began. It is down nearly 17% from its record high close in November. Rising interest rates tend to weigh disproportionately on shares of high-growth companies because investors value them based on earnings expected years in the future, and high interest rates erode the value of future earnings more than the value of short-term earnings.